The CEO of California-based Titanium Blockchain has been sentenced to four years in prison - ending a 2018 initial coin offering (ICO) saga that robbed investors of $21 million.
According to the U.S. Department of Justice, Titanium Blockchain Infrastructure Services (TBIS) founder Michael Stollery was a key figure in a “cryptocurrency fraud scheme” that involved fraud for TBIS between late 2017 and early 2018. Initial coin offering. Investors bought a type of encrypted token called BARs to participate in the ICO. About $21 million was raised from the U.S. and overseas, according to the Justice Department.
However, in a 2018 SEC complaint, Stollery was accused of failing to register the ICO with the regulator, among other charges. In July 2022, he pleaded guilty to one count of securities fraud for participating in a "fraudulent scheme."
He admitted to falsifying certain aspects of the TBIS white paper, planting false customer testimonials on the TBIS website, and falsely claiming to have a business relationship with the U.S. Federal Reserve all of which misled about TBIS’s legality and profitability prospects investors.
He also admitted to commingling ICO investors’ funds with his own, using some to pay unrelated expenses such as credit card bills and apartment bills in Hawaii, according to the SEC. Although he faces up to 20 years in prison, he will serve a total of four years and three months for his involvement. In recent years, the U.S. Securities and Exchange Commission has been ramping up its actions against the cryptocurrency space.
The number of cryptocurrency-related lawsuits filed by the SEC grew in 2022, with 30 enforcement actions against digital asset market participants for the year, a 50% increase from 20 in 2021, according to Cornerstone Research. Of the 30 enforcement actions in 2022, 14 involved initial coin offerings (ICOs), with more than half involving fraud allegations.
“Based on the implementation of the U.S. Supreme Court’s Howey test, the SEC continues to take action alleging that tokens issued in unregistered securities offerings related to ICOs are investment contracts subject to SEC regulation and enforcement,” said Abe Chernin, vice president at Cornerstone Research. Co-head of its fintech business.
"During the Gensler administration's encryption-related investigations, we observed an increase in assistance to the SEC by outside agencies and organizations," he added.
